For my childrens' first birthdays I did "#1" theme in blue for my son, pink for my daughter. Streamers, paper plates, etc were inexpensive at a dollar store. Balls and bubbles make good party favors. We play with bubbles in the bathtub all year long. The Oriental Trading website has unique party accessories and favors that are reasonably priced.
We, too, invited the entire family. Most of the neices and nephews were 6 and under at that time so we didn't have organized games (too much difference in attention spans and abilities). Since they were summer parties we were outside. The kids played with balls, bubbles, frisbees. We took an inflatable ball pit outside. You could just let the kids create their own fun with your son's toys. But if you want something more organized maybe do simple crafts (crayons/coloring books, foamie stickers, etc) or let them make their own ice cream sundaes or decorate cookies/cupcakes. BTW, did you know that many bakeries/grocery stores will give you a free little "smasher" cake for a one year old when you order a cake from them?
Overall, my thought is that simple is the way to go for the little ones. As adults, we get all caught up on the festivities and creating memories but our babies don't have a clue as to what is going on. Be prepared to be flexible in case your son isn't in a partying mood. And don't forget to take pics so you can relive the memories through the years. Have fun!